The British pound sits near a seven-week lows against the dollar this morning and three-week lows versus the euro, as doubt grows about whether the UK and the European Union can clinch a Brexit deal.
Bloomberg reported this morning that Brexit talks were on hold because Prime Minister Theresa May’s cabinet was not close enough to agreement on how to proceed for the negotiations to restart.
Next week, the Bank of England is expected to leave interest rates unchanged and stress that while there are some signs of rising wage and price pressures, it will not be ready to tighten policy until there is clarity on Brexit.
Fears of a no-deal Brexit and the wider risk-off market move have seen the (UK interest rate) curve flatten. Next week’s BoE policy statement is likely to restate the need for higher rates and we see scope for a steeper front end to money markets
With Brexit dominating the news agenda, Britain’s economic fortunes have taken a backseat.